GST woes: Govt lowers taxes on select movie tickets, film industry says relief too little

The government's decision to slash the GST rate for movie tickets below a certain threshold does not seem too have enthused the entertainment industry.

The industry had made known its displeasure that the peak 28 percent rate levied on movie tickets as they were hoping a lower rate would help give a breather following years of high taxation.

But the decision of the GST Council last week to slash GST rate on movie tickets costing less than Rs 100 hasn't found too many takers.

The industry has also questioned government's decision to tax movie tickets at the same rate as on betting and horse racing, all of which attract the 28 percent GST rate.

"The dual taxation thing is unnecessary and confusing and ultimately it is in response to the fact that the exhibition industry is deeply unhappy about being in a 28 percent tax slab which makes watching films equivalent to gambling and horse racing," said Rahul Puri, Mukta Arts Managing Director.

"Why is the slab clubbing us, the movie industry, with casinos and betting, and with revolvers and pistols? Is the Government trying to encourage cinemas, which are embedded in the social fabric of our country, or is it discouraging the industry by clubbing it with gambling and betting," asked Ajay Bijli, CMD, PVR.

According to a Deloitte report, India is globally the 5th largest media and entertainment market. Also, the Indian film industry is projected to grow at a CAGR of 7.7 percent till 2021 to be worth Rs 206.6 billion, says a KPMG report. It adds that domestic theatricals industry is expected to grow at a CAGR of 5.6 percent over the next five years.

However, members of the industry believe that the high GST could hamper the growth of the movie business.

Speaking to Moneycontrol, Puri also pointed out that ticket prices cannot be brought down to less than Rs 100 as at that price, the industry will not be able to uplift the standard of cinema viewing at all. "In the larger cities, this will be a complete moot point."

He said, "the new tax rate will ultimately not be particularly helpful as only a small proportion of shows and tickets go at Rs 100 and less. I think for the large players like PVR and Inox this is about 8-12 percent and an even smaller proportion of their revenues."

The share for Puri's firm, Mukta, is slightly higher at around 20 percent but he said that it would not help relieve the high taxation burden on multiplexes as the majority of tickets will be taxed at 28 percent.

"It (dual taxation policy) may encourage some theatres to reduce prices from say Rs 110-115 to Rs 100 to take advantage of the less tax incidence but that would also be marginal," he said.

Underlining his disappointment, Ashok Dash, COO of K Sera Sera Miniplex, said, "The industry was hoping for a single simplified and lowered GST rate. The very logic of classifying it under luxury and charging at 28 percent is debatable and has not gone well with the industry."